Millard County salt dome to begin storing liquid fuels

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Caverns hollowed out in a Millard County salt dome will begin storing propane and butane next month, potentially opening new market opportunities for Utah's natural gas industry, which has been hobbled by low commodity prices.

State regulators on Wednesday approved liquid-fuel storage operations at the Magnum Gas Storage Project. The project has been in the works for nearly six years while Magnum has used solution mining to carve out 2-million-barrel caverns in a two-mile-wide salt deposit, company general manager Sam Quigley told the Board of Oil, Gas and Mining.

Next week, Magnum hopes to begin filling the first of three caverns designed to hold natural gas liquids, or NGLs.

"The market is seasonal. Injection season hits April 1 and withdrawal season starts Oct. 1," James said.

But no fuel will be put into the caverns until they pass mechanical integrity tests overseen by the Division of Water Quality. The first such test is scheduled April 3.

The bore holes are protected by four cement casings, two of which are anchored into the salt dome. The casings are built to withstand pressures exceeding 3,000 psi to ensure that no liquids penetrate the strata overlying the dome

The project, which state oil and gas regulators say is the first of its kind in Utah, is unfolding under state trust lands 10 miles north of Delta and hardly a mile south of the Intermountain Power Project, the massive coal-fired generating station that is expected to convert to natural gas.

The Utah School and Institutional Trust Lands Administration (SITLA) acquired the land from the Bureau of Land Management in the West Desert land exchange with the aim of developing this salt dome, a formation lying 3,000 below the surface.

The dome is 7,000 feet thick, and is 90 percent sodium chloride, pure enough to be refined into table salt, according to Quigley.

Such a formation is rare in the Intermountain West, although using salt domes for gas storage is common elsewhere, such as in Kansas, Texas and Louisiana. It has yet to occur in Utah, although it has been attempted here.

The mining board approved operations after hearing strong messages of endorsement from the Division of Oil, Gas and Mining, state environmental regulators and the Millard County commission.

"We have monitored it along the way and feel good with the professionalism of the Magnum team," said SITLA general counsel John Andrews. He noted the company has been required to provide significant bonding and insurance "to protect the trust in the event of any incident or in case of reclamation."

Rental payments to SITLA are to increase four-fold once the project becomes operational.

County commissioner Daron Smith called the project "a great asset to our community bringing economic development and hiring local citizens."

Magnum leased the 750-acre project area from SITLA in 2008, but was initially interested in storing natural gas. Economic conditions related to price swings spurred the Utah company to expand the idea to include propane, butane and other NGLs. These valuable fuels turn to gas under normal pressures and temperatures, but remain liquid under pressure.

The project is made up of three distinct components: the underground caverns; a 152-acre brine retention pond; and a truck and rail off-loading facility. Most of the product will be delivered by rail spur off the line serving the nearby power plant.

Solution mining entails injecting fresh water deep into the salt formation. Underground salt dissolves into the water, which is pulled out as a cylindrical void forms in an upward direction. When complete, the Magnum caverns will be 150 feet in diameter and 1,200 feet tall. The company stores the brine in the pond when it's not in the cavern.

As NGLs are pumped into the cavern, the fuels will push the brine out. The biggest risk is if gas exits with the outgoing brine, Quigley said.

The company has put numerous safeguards in place to prevent such a scenario or to flare the gas should it still escape with the brine.

bmaffly@sltrib.com

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